Overtime Exclusion

[BobKamman]

How do you read this provision from today's House vote?

1)  Say someone gets paid $20 an hour, but $30 for overtime.  How much is excluded -- all $30, or just the $10?

2)  FLSA overtime rules apply only employers engaged in interstate commerce, or with annual sales of $500,000 or more.  There are some other categories.  Nonprofits are not covered.  So, if an employer pays overtime but is not subject to FLSA, does the exclusion still apply?

   ``(a) In General.--There shall be allowed as a deduction an amount 
equal to the qualified overtime compensation received during the 
taxable year.
    ``(b) Qualified Overtime Compensation.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified overtime compensation' means overtime compensation 
        paid to an individual required under section 7 of the Fair 
        Labor Standards Act of 1938 that is in excess of the regular 
        rate (as used in such section) at which such individual is 
        employed.

[IRonMaN]

Go with the most beneficial to the employee.  Since there won't be any IRS employees to ever question it, I think you can pick whatever you want.

[qbteachmt]

Our worker comp policies use similar wording for compensation by job position for computing the premium paid. "that is in excess of the regular rate" means your $10.

[sjrcpa]

So apparently, if you voluntarily pay overtime, or pay it due to a state or local law, then that overtime pay is not excludable?

[PATAX]

Hopefully this does not become a big mess. what will be on w-2? what will be on tax software and/or 1040? etc.

[BobKamman]

@IRonMaN It's only in effect (if it gets through the Senate) for 2025 through 2028.  We don't know how many employees IRS will have in 2029 and later years, and there's that pesky statute of limitations.

@PATAX There's another provision that requires overtime amounts to be reported on W-2s.  Including this year.  Including amounts paid before enactment.  So, there will be rules and instructions for that.  And new ways to figure income tax withholding.  

But what does the average worker who earns overtime, expect?  Will they have to lower their expectations, once the details are explained?  

[PATAX]

@BobKamman Good job researching that Bob.